Investec Capital Markets Day Bank and Wealth
Investec Group
Investec Capital Markets Day Bank and Wealth
26 February 2019 Today’s presenters
Fani Titi Introduction Joint CEO of the Investec Group
David van der Walt Joint Global Head of the Specialist UK Specialist Bank Bank and CEO of Investec Bank plc
Richard Wainwright Joint Global Head of the Specialist SA Specialist Bank Bank and CEO of Investec Bank Ltd
Steve Elliott Wealth & Investment SA & UK Global Head of Wealth & Investment
Nishlan Samujh Performance CFO of the Investec Group
Page 2 11 IntroductionIntroduction 44 2 UK Specialist Bank 23 3 SA Specialist Bank 47 4 Wealth & Investment business 64 5 Performance 77 6 Summary and Conclusion 88
7 Appendix 90
Page 3 Objectives for today’s presentation
Recap on the demerger rationale
Focus on Investec’s strategic positioning
Highlight initiatives to enhance returns
Demonstrate sustainable organic capital generation
Page 4 Rationale for the demerger
Why we are proposing to demerge Investec Asset Management from Investec Bank and Wealth
Conclusions of strategic review Demerger benefits
• Investec Group comprises a number of • Simplifies the Group, allowing the Specialist Bank successful businesses operating across two core and Wealth & Investment businesses to focus on geographies, with different capital requirements their growth paths and growth trajectories • Opportunity to build on compelling existing • Clear synergies between the Specialist Bank and linkages between the Specialist Bank and Wealth Wealth & Investment business & Investment businesses
• Group should be simplified to improve resource • Heightened focus leading to improved cost allocation, performance and growth trajectory discipline
• Limited synergies between Investec Asset • Allows Investec Asset Management to accelerate Management and the wider Investec Group its own growth, with enhanced ability to attract and retain talent
Enhance the long-term prospects of both businesses for the benefit of all stakeholders
Page 5 A business with nearly 40 years of heritage
Management FUM and core loans and advances (£’bn) succession 60 Focused on core markets Acquired Rensburg 50 Sheppards Leading specialist client franchises Growing connectivity between the 40 specialist bank and wealth business Investec FUM Core Loans and Advances UK listing Bank & 30 Well capitalised, lowly leveraged Wealth balance sheet 20 Diversified mix of business by
10 geography, income and business Highly scalable platform
1981 1992 2002 2010 2019
Assets under management (£’bn)
120 Established global asset manager with a unique emerging market
100 heritage Long-term growth track record Investec 80 Asset Well diversified by asset class and Management 60 region Launch of Investec Asset Management 40 Strong investment performance over prolonged period
20 Few linkages with wider group
0
Opportune time to consider strategic fit and shape of the Investec Group
Page 6 A distinctive specialist bank and wealth manager…
…facilitating the creation and management of wealth
We are driven by a commitment to our core values and philosophies
Dedicated Cast-iron Distinctive Client focus partnerships integrity performance
Embodied in our distinctive culture
We have a client-centric, high-tech, high-touch approach – distinction in our ability to be nimble, flexible and innovative, and to provide a high level of client service
We seek to attract and retain highly talented professionals by maintaining an environment that stimulates high performance and encourages creativity and entrepreneurship
The careful selection of people, their ongoing education and uncompromising commitment to our stated values will continue to be a distinctive characteristic of Investec’s culture and drive
Stable senior management team with a long tenure at Investec
We integrate social, ethical and environmental considerations into day-to-day operations and our sustainability approach is based on the integration of people, planet and profit
Page 7 Overview of Investec post demerger
A domestically relevant, internationally connected specialist banking and wealth management group
March 2018 Group profit* 2 2 8,000+ 17% Principal geographies Core areas of activity Employees £573mn 27% 56% £24bn £30bn £57bn
Core loans Customer deposits Third party FUM SA Bank UK Bank Wealth & Investment SA and UK
Corporate / Institutional / Government / Private client (HNW / high income) / charities / trusts Intermediary
Specialist Banking Wealth & Investment
Lending Discretionary wealth management
Transactional banking Investment advisory services
Treasury solutions Financial planning
Advisory Stockbroking / execution only
Investment activities
Deposit raising activities
Information on this slide is as at 30 September 2018, unless otherwise indicated. * Before taxation and central costs of £50mn. Based on the results of the ongoing business (excluding UK Specialist Bank Page 8 legacy assets and businesses sold) and excluding IAM, unless otherwise specified. We have market-leading specialist client franchises
SA Specialist Bank UK Specialist Bank
Top Top Top Top #5 #1 tier tier tier tier
5th largest Top Corporate Specialist client franchises span Corporate Small Ticket Treasury Risk bank by assets Private Advisory and Infrastructure, fund finance, aviation… Advisory and Asset Finance Solutions Bank Equity Sales Equity Sales provider
Top Top tier tier
One of the largest One of the Wealth Managers leading Wealth in the UK Managers in SA Wealth & Investment SA and UK
We are not all things to all people: we serve select niches where we can compete effectively
Page 9 We have a diversified mix of businesses
Geography Business Income stream
2018 Operating income 2018 Operating income 2018 Operating income
21%
46% 44%
54% 56%
79%
2018 Operating profit1 2018 Operating profit2 Balance sheet driven Capital light
17%
36%
64%
83%
UK and Other Southern Africa Specialist Banking Wealth & Investment
Diversified geographic business model with growing capital light revenues
Information on this slide is based on the results of the ongoing business (excluding UK Specialist Bank legacy assets and businesses sold) and excluding IAM, unless otherwise specified. 1Before tax, goodwill, acquired intangibles, non-operating items but after adjusting for earnings attributable to other non-controlling interests and central costs. 2Before tax, goodwill, acquired intangibles, non-operating items and central costs but after Page 10 adjusting for earnings attributable to other non-controlling interests. We have positive organic capital generation across our business
Healthy capital position Existing capital generation supports growth and dividends
H1 2019 (standardised approach) as reported, including IAM Positive capital generation across all three core businesses
Common equity Tier 1 ratio • All businesses are capital self-sufficient + Total capital adequacy ratio • Supports RWA growth of c.8% to 10% p.a. 15.4% 14.7% • Supports proposed dividend policy of 30% to 50%
• Maintain appropriate capital adequacy / buffer across Investec plc and Investec Limited
• Any dividends from the Wealth & Investment business passed through to shareholders
10.3% 10.4%
Investec Limited Investec plc
7.5% 7.7%
Leverage Ratio
Well capitalised, lowly leveraged balance sheet with improving capital generation
Page 11 We have successfully transitioned to the next generation of management
Smooth transition of senior leadership
Long history working together at Investec with average tenure of 20 years for executive team
Supported by strong management teams across the business units
Average tenure of 18 years for top 50 senior managers
Passionate and entrepreneurial culture
Page 12 Solid foundations but more to be done
Solid foundations Current ROE* performance
We are focused on improving • Client-centric approach is in our DNA Group ROE at ROE H1 2019: 11.0%
• Market leading specialist client franchises with an • Our franchise businesses in 13.0% both SA and UK have ROEs established brand at the lower end of our
9.1% geographic target ranges • Locally responsive and internationally networked • Our ROE in SA is affected by lower returns on our • Addressed legacy / non-core businesses investment portfolio, which we have plans to address
Total SA Total UK • Invested in our platforms • Our ROE in the UK reflects significant investment into our Our targets • Sustainable organic capital generation to fund business, notably the Private Bank, the benefits of which growth ambitions and dividends will emerge in the medium- Group: term 12%-16% We aim to deliver on these SA**: UK: • 15% to 18% 11% to 15% targets over the next three years
Simplifying and refocusing the Group to improve shareholder returns
*ROE targets take into consideration Group Central Costs and reported information is post the deduction of these Group Central Costs. Page 13 **Target set in Rands. Our initiatives to enhance shareholder returns
We are focused on five key initiatives to enhance returns for shareholders
1 2 3 4 5
Capital Growth Cost Connectivity Digitalisation Discipline Initiatives Management
More disciplined Improved Continue to invest in approach to capital Clear set of management of cost Drive greater digital capabilities, allocation, opportunities to base, with increased connectivity and creating a better particularly where deliver revenue focus and benefits to linkages through the proposition for businesses are non- growth be gained through organisation clients and reducing core to our long-term simplicity costs strategy
Enhancing returns for shareholders
Page 14 1 More disciplined approach to capital allocation
Focusing on businesses generating below target ROEs
Actions taken to date Planned actions
• Simplified and de-risked our business • Optimise capital allocation through: • Review and address underperforming - Strategic sales business units
- Re-balanced the loan book • Manage down non-core equity investments portfolio in SA - Run-down the legacy portfolio • Focus on co-investment alongside clients to • Grown our client franchises fund investment opportunities Capital Strategy • Invested substantially in our UK Private • Leverage third party capital into funds that Banking franchise are relevant to our client base
• Made substantial investment in digital • Leverage distribution strengths to grow channels and solutions, including Click & capital light income stream Invest and One Place
Maintain self-sustaining capital model in both the UK and SA
Page 15 2 Pursuing our growth plans
Multiple opportunities to drive further growth
Extend Specialist Banking Further develop Wealth & UK Private Bank shift from proposition Investment offering platform build to client growth • More holistic client-centric offering to • Expand financial planning (UK) and mid-sized corporates (SA Investec fiduciary capabilities (SA) • Focus on client acquisition and for Business and UK Corporate retention Banking) • Increase collaboration with Investec Private Bank • New private client lending platform • Investec Life initially focused on mortgages • Focus on investing and developing • Integrated offering for intermediaries digital channel in SA • Extend breadth of global investment • Transactional banking offering for offering, particularly in alternative corporates asset classes such as private equity
• Expand the Specialist Bank’s funds and investment product businesses
Page 16 3 Increased focus on effective cost management
Historical increases in our cost to income ratio reflect strategic investment in the business
Improving cost to income ratio^ in the medium-term Historical cost to income ratio development
• The increase in our cost to income ratio historically reflects a period of strategic investment in the business:
- Development of scalable UK Private Bank platform
68.2% 67.7% 68.5% 66.8% - Focus on digitalisation and technology development
< 63% - Investment in talent
• Our growth initiatives have been fully expensed
Achieving our medium-term target* of < 63%
• We expect historical investment to accelerate revenue growth as we leverage the investment in our business
• Areas identified for improvement in our cost base:
- Reduction in Group Costs
- Greater shared use of technology across the Group, optimising our operational platforms
- Further utilisation of lower cost operations, including SA 2016 2017 2018 H1 2019 Medium-term target* Delivering positive jaws
*Which we aim to deliver on over the next three years. ^Calculation adjusts for the Group’s 26.57% interest held in the Investec Property Fund (IPF), by deducting the IPF minority interests from income. Page 17 4 Connectivity: Locally relevant and internationally networked
Meeting the needs of our sophisticated, and internationally orientated clients
Between Specialist Bank and Wealth & Between SA and the UK Investment
• Seamlessly serving SA HNW and corporate clients • Private Bank / Wealth offering: One Place who have international financial needs • Wealth & Investment access to products (where • Leveraging expertise in specialist client suitable) originated/sourced/developed in the franchises Bank Existing connectivity • Shared use of operations (e.g. SA customer • Client journeys – interconnections across service centre) corporate bank, investment bank, private bank and wealth • Single global investment process for Wealth & Investment • Global digital platforms for private clients and IFAs
• Greater cross collaboration between the various • Greater cross referrals between the Specialist banking businesses Bank and Wealth & Investment business particularly in the UK • Cross border M&A transactions Opportunities • Further digital platform integration around client for greater • Providing international investment products to type connectivity our intermediary client base • Potential for further shared operational linkages • Leverage the transactional banking platform between SA and the UK • Alternative investment products
Page 18 5 Continuing to invest in Digitalisation Our digitalisation strategy integrates services across business and geography, to bring to life a high-touch, high-tech experience Private clients Intermediary clients Corporate clients
SA Investec for Business
Integrated access to Investec’s banking and investment services
Complete digital offering providing Unified experience for SA UK Corporate Banking advice online Intermediary clients allowing them to transact, save and trade
Best Digital Bank in SA
Most Innovative Digital Bank in Africa
Joint 1st Robo-Advisor for Click & Invest Joint 2nd for One Place Mobile App
Technology is not only a business enabler, but also a catalyst for continuous improvement in executing strategy in a digital era
Page 19 Enhancing shareholder returns over the medium-term
Narrowing gap between statutory and ongoing ROE Drivers for ROE enhancement
ROE evolution since 2011 More efficient approach to capital > allocation
11.9% 11.9% 11.9% 11.3% 11.1% 11.2% 11.0% 10.6% Clear set of strategic initiatives to > support income growth 8.9%
Group ROE Increased focus on delivering cost Target*: > improvements
9.8% 10.0% 12% to 16% 9.3% 8.3% 8.0% Drive greater connectivity and 7.5% 6.5% > linkages across the business 4.9%
> Continue to invest in digital 2011 2012 2013 2014 2015 2016 2017 2018 H1 2019 capabilities
Statutory ROE + ROE from ongoing business
Enhancing ROE supports investment for growth and attractive returns for shareholders
Information on this slide is based on the results of the ongoing business (excluding UK Specialist Bank legacy assets and businesses sold) and excluding IAM, unless otherwise specified. Page 20 *Which we aim to deliver on over the next three years. Clear set of financial targets underpins our objectives Which we aim to deliver on over the next three years
Cost to Income Dividend Group ROE CET1 Ratio Ratio Payout Ratio
12% to 16%* < 63% > 10% 30% to 50%
UK*: SA*: UK Bank: SA Bank: 11% to 15% 15% to 18% < 65% 49% to 52% UK Bank: SA Bank: UK Wealth: SA Wealth: 10% to 13% 14% to 16% 73% to 77% < 70%
*Target takes into consideration Group Central Costs. Page 21 All SA targets on this page are set in Rands. 1 Introduction 4 22 UKUK SpecialistSpecialist BankBank 2323 3 SA Specialist Bank 47 4 Wealth & Investment business 64 5 Performance 77 6 Summary and Conclusion 88
7 Appendix 90
Page 22 Banking
UK Specialist Bank overview UK
Strong domestic client franchises complemented by international specialist capabilities
Corporate and Investment Banking Private Banking
Our Capital, advice and ideas, risk management and Lending, savings, transactional banking and offering treasury solutions foreign exchange
Mid to large UK Our clients Small to mid-sized corporates, private equity HNW and high income active wealth creators, SA UK corporates sponsors and specialist Investec clients and UK retail savers international businesses
£’bn Loan growth over time CAGR: 9% 12 Employees c.2,300 10
8 % Operating Our growth 6 profit* 27% story contribution 4
2
% Loan book 0 38% 2011 2012 2013 2014 2015 2016 2017 2018 H1 2019
Information on this slide is based on the results of the Ongoing business (excluding UK Specialist Bank legacy assets and businesses sold) as at 31 March 2018, unless otherwise specified. Page 23 *Before tax, goodwill, acquired intangibles, non-operating items and central costs but after adjusting for earnings attributable to other non-controlling interests. Banking
We have evolved our business model and are strategically well positioned UK
• Simplified and de-risked our • Fully invested Private • Improved revenue mix – business as a basis from which to Banking franchise with a client-driven, high annuity grow clear market opportunity set and increased capital light to realise benefits of increased scale 1 3 5
2 4 6
• Achieved considerable scale • Enhanced connectivity across Going forward: in our competitively the businesses with strong - Strong growth strategies positioned Corporate and potential for further collaboration Investment Banking - Focusing on cost discipline franchises with sustainable - Improving returns growth opportunities - Delivering sustainable organic capital generation
Well positioned for future growth
Page 24 1 Banking
Simplified and de-risked our business UK
Significantly reduced Legacy portfolio
Run-off of Legacy assets Reduction of Legacy as % of UK loan book Increase in Legacy coverage
£’bn
Other Private Bank assets 31.7%* 4.8 9.9% Private Bank Irish planning and development assets 26.6% Other corporate assets and securitisation activities Ongoing – 96.8% 7.5% 20.2% 17.2% 17.6% 2.6 5.5% 2.2 3.2% 1.9% 0.7 0.6 0.5 0.3 0.2
2008 2013 2014 2015 2016 2017 2018 H1 2019 2015 2016 2017 2018 H1 2019 2015 2016 2017 2018 H1 2019
Significantly reduced Property as % of UK loan book Significantly improved Credit Ratings^
16% 23% A1 Moody’s A2 A2 (positive) 201052% H1 2019 62% 22% A3
25% BBB+ Fitch BBB Baa3 / BBB- Lending collateralised by property HNW and other private client lending Jun15 Oct15 Feb16 Sep17 Feb19 Corporate and other lending
Our UK legacy portfolio is pre-2008 business with very low/negative margins, and assets relating to discontinued business. *Total effective coverage on the overall legacy portfolio (including assets held at fair value through profit and loss), calculated as if fair value adjustments are equivalent to balance sheet impairments). Page 25 ^Credit Ratings shown relate to Investec Bank plc deposit and long-term senior debt ratings. 2 Banking
UK Corporate and Investment Banking (CIB) overview UK
Our value proposition
• Client-centric, solution-driven offering – opportunity to drive client acquisition and increase market share • Tailored offering focused on UK mid-market corporates, financial sponsors and specialist international franchises
Corporate Banking Investment Banking
• Creating a premier UK mid-market investment bank by offering boutique service and bulge bracket capability to • Delivering a ‘private banking’ experience with investment Ambition our target clients banking quality of advice and service • Specialist international franchises: building deep relevance in our chosen sectors through our expertise
• UK Investment Banking: Larger mid-market UK Clear • Small to mid-sized UK corporates (c.£10mn - £100mn corporates (£100mn - £1bn revenue) and the financial target revenue) sponsors that operate in that space market • High probability of corporate activity or growth • Specialist international franchises: aviation, fund finance, power and infrastructure finance and resource finance
Shared infrastructure
2017 2017 2018 2018 2018 2018 2018 2018 Best Commercial Innovation in the SME Best service from an Best Asset Finance Bank Lender of the Sole Arranged $2bn of • Sole Sponsor & • Sole Corporate Lender – Commercial Finance Sector Asset Finance Provider: Winner Year financing for Emirates Corporate Broker Broker & Joint Finance Awards Provider between 2016 and • GVC’s £3.2bn Sponsor 2018 takeover of • £8.1bn hostile offer Ladbrokes Coral for GKN plc
Page 26 2 Banking CIB: Creating a leading Corporate Banking offering… UK …with a joined up, client-centric approach for our target market (£10mn - £100mn corporates)
Our differentiation: Specialists Agile, personalised service, tailored to meet needs of small to mid cap corporates We offer: • Lending • Working capital • Treasury and risk solutions • Advisory
£10mn £100mn £1bn+ Size of client
High Street Banks
Generalists
Page 27 2 Banking
CIB: Uniquely positioned Investment Banking with a holistic proposition UK
Boutique service with ‘Bulge Bracket’ capability and award winning franchises
• Tailored offering to meet the needs of UK mid-market corporates (£100mn – £1bn revenue) and financial sponsors • Our specialist international franchises sector businesses are differentiated by our deep expertise and relationships and our ability to innovate alongside our clients
Securities Lending Advisory Risk
We offer the capabilities of the global investment banks to the UK mid-market banks Global where the global
investment investment investment banks typically do not focus
We compete on the basis of our breadth of capabilities and personalised service Specialists / high street banks street high / Specialists
Core offering Ability/Non-core offering to mid cap market No offering Page 28 2 Banking CIB: Achieved considerable scale in the business UK
Consistently contributed 35-40% of Global Specialist Bank revenue Improved revenue sustainability and Growth in sustainable core corporate client franchises mix underpinned by client franchises
Corporate Banking Investment Banking 2011
Investment 86,000 600 and other income 300 80 2006 YTD 2019 2006 YTD 2019 81%
Client driven income Increased scale creates opportunity to provide our full service offering to our clients
1,800 ►
0 2006 YTD 2019 2018
Investment 140 and other (high value, event income driven clients) 80 2006 YTD 2019
• Significant growth since inception to become well-established, award-winning franchises 97% • Built sustainably through organic growth and diversification into new markets and specialisms Client driven income • Differentiated, high calibre offering with strong relationship management and deep expertise
Page 29 2 Banking CIB: Delivering attractive and sustained growth UK
Growth in corporate loan book Diversified corporate loan book
Net book size in £’bn and as a % of total UK net core loans Net corporate loan book by risk category*
£’bn CAGR: 17% 7 62% 8% 61% Project finance 6 6% 26% Large ticket asset Corporate and 60% finance acquisition finance 5
55%
4 52% 24% 40% 5% Small ticket 37% 6.3 Asset-based lending 3 5.9 asset finance 34% 30% 5.1 4.3 2 23% 3.7 20% 3.2 11% 3.0 Fund finance 2.6 2.3 Other corporate and 1 financial institutions 1.7 and governments
0 2010 2011 2012 2013 2014 2015 2016 2017 2018 H1 2019
*As at 30 September 2018. Page 30 2 Banking Evolved to build a capital sustaining business model UK
Highly successful origination and distribution capability and growing fund management capability
Allows us to Provides Raises Enhances Generates punch above Increases valuable Investec’s Maintains returns by additional our client market intel, profile among diversity of recycling capital light benchmark in relevance off- aiding institutional loan book capital revenue alternative balance sheet origination of investors space new deals globally
Selling more deals… …and bigger in size
Number of deals sold £’bn 60 4 3.8 50 54 3 46 40 43 2.7
30 2 29 2.0 20 1.3 19 1 10 0.7
0 0 2015 2016 2017 2018 2019 YTD 2015 2016 2017 2018 2019 YTD
…and growing our fund management capability, with £1.3bn of third party assets raised year to date
Page 31 2 Banking Evolved to build a capital sustaining business model (cont.) UK
Case study: Building a world-leading Aviation franchise
• Well-established aviation franchise built on deep sector expertise and client Client franchise relationships c.US$1.1bn Innovation and • We continually innovate to remain relevant by launching and managing third debt AuM relevance party aircraft leasing and debt funds
Connectivity • Global team leverages experience and relationships across the globe c.US$4.0bn equity AuM Fund • 10 year fund management track record with over c.$5bn of third party AUM management across debt and equity funds – providing recurring capital light revenue track record
Aviation third party assets under management
$’mn
8,000 Sold IGAF and IASL Sold Goshawk No 1 portfolios 7,000 after growing to Launched Debt US$3bn+ Launched IASL No.1 – Funds 6,000 acquisition value: $600mn Launched Goshawk 5,000 Launched IGAF – 4,000 acquisition value: $1bn 3,000
2,000
1,000
0 2008 2009 2010 2010 2011 2012 2013 2014 2015 2016 2017 2018 H1 2019
IGAF IASL Goshawk Aircraft Investments (Third Party) Debt Funds
Where IGAF is Investec Global Aircraft Fund, IASL is Investec Aircraft Syndicate Limited. Page 32 3 Banking
UK Private Banking overview UK
HNW Retail savings and SA clients Our value • Client led (not product) • Product led proposition • High touch, relationship based • High tech, digital, self service • Expertise and speed • Innovative products
Ambition • To build an aspirational HNW private bank which facilitates wealth creation integrated with wealth management
• SA Investec clients Clear target market • HNW active wealth creators • UK retail savers
HNW Retail savings and SA clients
Structured Private property capital HNW investment finance banking Income producing real estate
Business model Banking Bank Savings Onshore and Offshore Shared platforms accounts transactional banking, mortgages, personal finance, FX Foundation Niches Client acquisition and relationship building Client acquisition and funding 3,500 clients 56,000 savings + 8,500 SA clients
Offering Lend Transact Save Transact Save
Telephone Telephone Banker Digital Digital Channels (GCSC*) (GCSC*)
Quantitative Qualitative Mass affluent and Income £300k+ Time poor, active, Target client SA Investec clients and NAV £3mn+ wealth creators
*Global client service centre. Page 33 3 Banking Private Banking: Clearly defined target market UK
Our proposition is aligned with a clearly defined target client base
Size of opportunity*…
296,000 meet NAV criteria
£3mn NAV Quantitative + criteria £300k earnings 178,000 Allows us to deal meet NAV + directly with Earnings criteria clients, avoiding restrictive Target market regulations requiring the broader retail 90,000 meet NAV, market to deal Earnings and Qualitative via an IFA • Actively creating wealth criteria Qualitative • Entrepreneurially minded criteria • Time poor 3 year 7-10% of Objective: target market
Current target market client base: 3,500
*Source: As per research from Scorpio, Oliver Wyman Ltd and Investec’s Private Banking marketing team. Page 34 3 Banking Private Banking: Clear market opportunity UK
Traditional Retail Banks A different kind of private bank Traditional Private Banks
For customers that need a For clients that need a risk-partner to For clients that need wealth homogenous product grow their wealth preservation
• High volume and low price • Primarily capital-led, with • Primarily investment-led transactional banking and savings • Low flexibility capability • Low volume, high price
• Flexible but rigorous lending criteria • Impersonal and product-led • Focused on wealth preservation
• Not constrained by minimum client • Time consuming and bureaucratic AUM • High minimum AUM thresholds for clients
• Individual tailored service within a niche market seeking wealth creation
• Refreshingly human with high service level – ability to deal with complexity and execute quickly
Page 35 3 Banking Private Banking: Fully invested for the future UK
New Banking proposition – invested to achieve a scalable platform
£’mn 30 • Investment phase complete - c.£67mn will have been invested by 25 Investment Mar 2019: 20 into new • People Banking 15 • Platforms proposition 10 • Marketing 5
0 •Digital 2015 2016 2017 2018 2019 estimate
Investment into our people* Banking loan book Successful client acquisition
# £’bn Average mortgage risk weight of 37% 3,500 500 3 950 450 56,000 400 CAGR: 17% 350 2 0.4 300 0.4 250 46,000 0.4 0.3 200 8,500 1 0.2 150 1.7 1.5 100 1.1 1.2 1.0 50 140 0 0 2015 2016 2017 2018 H1 2019 2015 2016 2017 2018 H1 2019 2014 2019 Mortgages HNW and specialised lending
Ambition over 3 years: c.£3bn new mortgages @ £2mn average size = 1,500 mortgages (with c.1% NIM)
*Represents headcount for total Private Banking business (i.e. Structured property finance, Private capital, Banking, Bank accounts and Savings). Page 36 4 Banking Enhancing connectivity across the business UK
Connecting Specialist Banking and Wealth & Investment
We seek to establish greater connectivity by pursuing: • Cross referrals between the Private Bank and Wealth & Opportunity to seamlessly service the Investment for the HNW and family office client financial needs of our clients • Cross referrals from the Corporate and Investment Bank to Wealth & Investment and Private Bank, with respect to directors and shareholders
• Shared brand and infrastructure costs
• Shared digital platform and client access, with potential for single client sign on
• Additional potential for shared operational services
YTD 2019 referral statistics
35 referrals, 63 referrals, 21 converted with 23 converted with £27mn drawn, >£60mn of AUM, £10mn pipeline and >£30mn pipeline Wealth & Private Bank CIB Investment 171 referrals, 44 converted with £65mn of AUM
Page 37 4 Banking Case study: Supporting our clients through their lifecycle UK
Advised, floated company, then provided ongoing strategic and corporate broking advice Investment Banking
Management became personal clients of Wealth & Investment Leading consumer brand Advised on FX Wealth & Corporate hedging and provided Investment and FTSE Banking small asset finance company loans
Private Banking New private banking client
Investec has supported this client since 2013, through IPO in 2014 at a market cap of £154mn, to its current market cap of >£3bn
Page 38 4 Banking Case study: Private bank and wealth collaboration across border UK
August June 2015 2017 2018 2015
Assisted a Private Bank Private Bank All client HNW SA UK provided UK referred funds non-client client with a client to transferred open HNW private Private from a offshore bank bank account Bank SA competitor to accounts in Investec the Channel Wealth & Islands Investment (SA and UK)
Customer
journey
July 2015 2017 2018
Private Bank Private Bank Client UK provided UK referred transferred a UK primary client to private bank residential Wealth & account from mortgage Investment a competitor SA, for an to Investec Investment Private Bank portfolio SA
Page 39 5 Banking Improved revenue sustainability by growing our client franchises UK
Evolution of revenue mix
Annuity income* • Increased level of annuity* income 2018: 56% £’mn
800 • Improved revenue mix - increase in quality, quantum Annuity income* 713 and sustainability of earnings: 700 2011: 31% 58 - Strong lending franchises driving high level of 600 113 531 net interest income – c.47% of revenue 500 140 139 - Strong advisory and corporate franchise 400 49 70 generating sound level of fees
300 178 - Strong client treasury franchise resulting in 200 recurring level of client flow 332 35 100 130 • Capital light banking activities = c.30% of revenue 0 2011 2018 • Net interest margin of 2.19% – increased in recent years largely due to improved cost of funding Investment and associate income Customer flow trading income
Other fees and other operating income Annuity fees and commissions
Net interest income
Information on this slide is based on the results of the ongoing business (excluding UK Specialist Bank legacy assets and businesses sold). Page 40 *Where annuity income is net interest income and annuity fees. 6 Banking
Going forward: Growth strategies UK
Corporate and Private Investment Banking Banking
• More joined-up, client-centric approach driving • Shift from platform build to client growth, with increased client relevance and client acquisition; focus on client acquisition and retention aided by our reorganised internal business structure • Use mortgages as primary client acquisition proposition to leverage relationships into our • Build on our growing success in credit Structured Property Finance and Private Capital distribution and third-party funds management offerings
• Greater focus on cross-border client • Grow Private Capital proposition opportunities from enhanced connectivity with the SA Specialist Bank Bringing • Further leverage our Banking platform to full SA clients proposition to all clients
Wealth & Investment
Refer to Wealth & Investment growth initiatives further on in this document which include enhanced connectivity with the UK Specialist Bank
Page 41 6 Banking Going forward: Focused on cost discipline UK
Costs and cost to income ratio A clear path for achieving our targets
£’mn Leverage substantial investment in our Private Banking business which is fully 600 100% > expensed
500 77% No longer incurring double premises 77% 76% 80% 75% 76% 73% > 74% 71% costs 70%
400
60% Restructured our expensive sub-debt Target*: > 300 < 65%
40% Leverage technology and existing 200 > capabilities to improve client experience and reduce cost
20% 100 Strategic review of business model and > cost infrastructure to effect cost efficiencies
0 0% 2011 2012 2013 2014 2015 2016 2017 2018 H1 2019
Costs £'mn (LHS) Cost to income ratio (RHS)
Information on this slide is based on the results of the ongoing business, excluding UK Specialist Bank legacy assets and businesses sold. Page 42 *Which we aim to deliver on over the next three years. 6 Banking
Going forward: Capital generation and allocation UK
Capital strategy
• Specialist Bank internal capital generation sufficient to sustain growth and achieve target ROE
• Dividend from Wealth & Investment business passed through to shareholders
• Able to self-sustain c.7-8% RWA growth p.a.
• Supported by sound capital position
• Facilitated in the short term by SA dividend cover to Investec plc shareholders registered on the SA branch register
• Strict capital management and allocation to achieve medium-term targets
• Strategic shift away from Private Equity to client led principal investments
Page 43 6 Banking
Going forward: Focused on ROE UK
UK Specialist Bank ROE** trend A clear path for achieving our targets
• ROE track record of ongoing business excluding new Banking proposition is within target range > RWA growth of c.7%-8% p.a.
Accelerated legacy 13.5% impairments 12.7% Growing our client base and > revenue 11.4% 11.5% 11.6% 11.1% 10.5% 9.6% 9.3% Leveraging the investment in Target*: 8.5% > the Private Bank 7.0% 10% to 13% 5.5% > Enhanced cost discipline
3.2% 2.1% > Optimising capital allocation
2015 2016 2017 2018 H1 2019
ROE statutory Increasing capital light revenue ROE ongoing^ business > ROE ongoing^ business ex new Banking proposition
**All ROEs are post tax *Which we aim to deliver on over the next three years. Page 44 ^Ongoing business is excluding UK Specialist Bank legacy assets and businesses sold. Banking
Initiatives to enhance shareholder returns: UK Specialist Bank UK
We are well aligned to the Group’s identified five key initiatives to improve returns for shareholders
1 2 3 4 5
Capital Growth Cost Connectivity Digitalisation Discipline Initiatives Management
Driving a Target market high-tech and client acquisition More disciplined Greater collaboration high-touch and deepening our Fully invested growth approach to capital across the Corporate offering client initiatives and allocation, and and Investment Bank, relationships anticipate an effectively managing Private Bank and Continuing to invest improving jaws ratio our capital base Wealth & Investment in our Increasing capital technology light activities platforms
Page 45 1 Introduction 4 2 UK Specialist Bank 23 33 SASA Specialist Specialist BankBank 4747 4 Wealth & Investment business 64 5 Performance 77 6 Summary and Conclusion 88
7 Appendix 90
Page 46 Banking
SA Specialist Bank overview SA
Investment Banking Corporate and Private Banking Investec for Business and Principal Institutional Banking Investments
Advisory, debt, ECM, Import and trade Global markets and Lending, transactional client led private equity, Our finance, borrowing and various specialist banking, property property development, offering cash flow lending, asset lending activities finance, savings property fund finance management
Corporates (mid to large size), intermediaries, HNW, professionals and Smaller and mid-tier Corporates, institutions, Our clients institutions, government emerging entrepreneurs corporates property partners and SOEs
CAGR: 11% R’bn Loan growth over time 250 Employees c.4,000
200
150 % Operating Our growth profit* 56% story contribution 100
50
% Loan book 0 62% 2011 2012 2013 2014 2015 2016 2017 2018 H1 2019
Information on this slide is at 31 March 2018, unless otherwise specified. Page 47 *Before tax, goodwill, acquired intangibles, non-operating items and central costs but after adjusting for earnings attributable to other non-controlling interests. Banking
We have a solid franchise and positioning in the market SA
We have a specialised niche offering to a select target market
• Invested in our • Deepening our existing client business, sustainably relationships and client acquisition growing our client through the collaboration of product base and franchise offerings • Maintaining cost efficiency • We have a number of growth with low cost to income ratios initiatives
1 3 5
2 4 6
• Strong technology and digital platforms • Our growth initiatives and • Maintaining sound capital underpin our high-tech and high-touch strong franchise support our ratios and low credit loss offering solid revenue base ratios through varying market conditions • Continuous investment to maintain leading position (One Place, Investec • Enhancing our capital light Life, Transactional Banking) revenue base • Disciplined capital allocation
• We remain focused on improving ROE
Well positioned for future growth
Page 48 1 Banking SA Corporate and Institutional Banking overview SA
Strong franchise value and leading market position in our niche markets
Our value • Diversified client-centric offering proposition • Sustainable growth driven through collaboration between business units
Ambition • To be a top tier corporate and institutional bank
Clear target • Corporates (mid to large size), intermediaries, government and SOEs market
Global Markets Specialised Lending
• Well-established, award-winning franchises across: • Tailored offering and deep relationships with our target markets – large to mid-tier corporates and private equity funds • Trading (FICC, Equities, ECM and DCM) • Differentiated through deep sector expertise and international • Investment products reach • Treasury solutions and sales - Leveraged finance • Credit investments - Supplier finance
• Built sustainably through organic growth and diversification into - Power and infrastructure finance new markets - Fund finance - Aviation finance - Export and agency finance
• Award-winning specialist franchises by innovating alongside our clients
Page 49 1 Banking Growth in our corporate client base and franchise SA
Corporate client positioning Number of clients: c.4,950 Loan book: R80bn
Average Number of Number of Overall Specialist activities transaction Book size clients clients size
Large corporates (NAV>R3bn) c.150 Fund Finance c.25 R180mn R5bn
Power and c.20 R480mn R10bn Mid-tier corporates Infrastructure Finance c.200 (NAV: R500mn – R3bn) Aviation Finance c.18 R271mn R6bn
Retail Structured c.9,000 Small to mid-tier corporates c.4,600 R2mn FUM: R17bn Products investments
Recognition Retail Structured Products FUM
R’bn 20 17 2018 2016-17
Best Prime Services Best Performance in SA 2016, 2017 15 Best Capital Introduction Best Distributor in SA 2016, 2017 Best Technology Best House Africa 2017 Deal of the Year 2017 10
5 2016-17 2017 2016
African Power Deal of the Year 2016 Best African ECA Africa Finance Deal 0 Finance Deal of the Year African Transport Deal of the Year 2017 2011 2012 2013 2014 2015 2016 2017 2018 H1 2019
Page 50 1 Banking SA Private Banking overview SA
Our value • Bank, borrow, save and invest in One Place proposition
Ambition • To be a leading domestic and international Private Bank
• HNW individuals, emerging entrepreneurs, Clear target market professionals
Structured Private property capital HNW investment finance UK Private
Niches banking Income producing Bank real estate
Business model Banking Wealth & Investec Onshore and Offshore Shared platforms transactional banking, Investment Life mortgages, personal finance, FX Foundation
Client acquisition and relationship building c.75,000 clients
Offering Lend Transact Save Protect Invest
Telephone Channels Banker Digital (GCSC*)
*Global client service centre. Page 51 1 Banking Growth in our private client base and franchise SA
Private client positioning
Number Private Of which are Number of clients: c.75,000 Bank clients Wealth clients
c.75,000 clients Private clients c.9,000 clients c.113,000 accounts Loan book: R180bn Property clients c.900
Recognition Private Capital c.200 clients
Growth in private banking clients 2013-19 Ranked #1 in Private 2018 CAGR: 6% # Banking Survey 7th Best Private Bank and Year in a row Wealth Manager in SA 80,000 75,000
70,000
60,000
50,000
40,000
30,000
Investec Private Bank wins People’s 20,000 Choice award for the 5th time 10,000
0 2014 2015 2016 2017 2018 2019
Page 52 1 Banking SA Investec for Business overview SA
Our value • Combining bespoke lending with Investec’s other transactional, advisory and investment offerings proposition • High-touch and high-tech tailored offering that affords simplicity to clients
Ambition • Develop an integrated niche offering to our target clients
Clear target market • Smaller and mid-tier corporates
Bespoke lending offerings for working capital optimisation and business growth
Borrowing Base and Cash Asset Finance Flow Lending Niche funding for the Leverages client balance sheet purchase of the productive (debtors, stock and other assets) assets and equipment to provide niche working capital solutions or longer term growth funding
Bespoke lending offerings are packaged to align and optimise the working capital INVOICE cycle and to provide the headroom Import and Trade Finance needed for Funds the purchase of stock and services business growth on terms that closely align with the working capital cycle
Page 53 1 Banking SA Investment Banking and Principal Investments overview SA
Investment Banking Principal Investment activities
• Focus on co-investment alongside clients to fund Our value • To leverage our capabilities, relationships and capital investment opportunities or leverage third party proposition to deliver holistic solutions to our clients capital into funds that are relevant to our client base
• Using our collective skill set to optimise capital • To be the leading Investment Bank with an Ambition allocation in principal investments and generate a international footprint high IRR on these investments
Clear target • Corporates • Corporates and institutions, property partners market
Relationships
People Capability Client led Direct property Ideas Advisory Debt private development and Business model fund platform Assets equity Capital and offering Equity Investment capital Equity Banking markets Debt ideas Network Shared skill set Independent teams
International Australia Hong Kong India SA UK access
Investment Banking Coverage Private Bank CIB Wealth & Investment Channels Origination
Page 54 2 Banking We have a high-tech and high-touch specialised offering SA
Technological and digital leadership are real differentiators for our clients… …Our One Place offering is one such example
Private Bankers and Wealth managers, Private Capital team, Property Finance team, Global How we engage CSC, digital High-tech | High-touch Client Investec sees, treats, protects, advises and rewards each client as an individual. “It feels like experience it’s about me, my family and business, now and in the future.”
Local Local In partnership with like- We solve their needs banking investments minded individuals, we Structured property through compelling turn entrepreneurial vision finance, local and segmented propositions International International and aspiration into international banking investments commercial reality
Growth in online transactions Client engagement
• Total logins for Private Bank SA grew to almost 17mn during 2018 • Current average is over 1.4mn logins p/m compared to 135k logins # mn CAGR: 13% # mn p/m in 2014 14 1.6 1.4 12 1.4 1.3 10 1.2 1.1 0.7 8 1.0 0.8 0.6 0.4 0.8 6 0.2 0.6 4 0.4 0.6 0.7 0.7 0.7 2 0.2 - 0.0 2014 2015 2016 2017 2018 2014 2015 2016 2017 2018 Average monthly online logins Average monthly app logins
Page 55 3 Banking Deepening our client relationships and focused on our growth initiatives SA
• Investec Specialist Investments business Corporate and • Investec Life* Institutional • One Place for intermediaries: creating a digital product Banking that is seamless • Transactional business banking to reduce cost of funds
• Further expansion of our One Place offering and collaboration with Wealth & Investment ‒ Fiduciary offering Private Banking ‒ My Investments • Leverage our Young Professionals strategy • Private Capital – partnering with start up Fintech opportunities
Investment • Focus on a client centric approach to equity Banking and investments Principal • Grow our property fund management business Investments
• Effectively leveraging the Group’s current client base Investec For • Launch of digital transactional banking Business • Transactional business banking solution: positioning ourselves as a specialist business bank
*Investec Life: target market currently only to Private Bank clients. Page 56 4 Banking Solid growth in revenue with a high annuity income base SA
Growth in revenue over time
R’mn Annuity income*
16,000 2018: 77% • CAGR in revenue since 2011 of c.10% 14,000 13,469
1,808 12,000 • Increased level of annuity* income Annuity income* 423 854 10,000 2011: 64% • Strong lending franchises driving high level of net 3,300 interest income – c.53% of revenue 8,000 7,026
1,271 6,000 303 • Net interest margins stable at c.2% 951 4,000 781 7,084 • Strong advisory and corporate franchise generating
2,000 3,720 sound level of fees
0 2011 2018 • Strong client treasury franchise resulting in recurring level of client flow
Investment and associate income Customer flow trading income
Other fees and other operating income Annuity fees and commissions
Net interest income
*Where annuity income is net interest income and annuity fees. Page 57 5 Banking We are maintaining efficiency in our cost base SA
Costs and cost to income ratio^ Overview and objectives
R’mn 7,000 60% Invested in the business while 54% 55% 53% 53% 51% > maintaining the cost to income ratio 50% 51% 50% 6,000 50% 50%
Going forward: aim to create 5,000 > positive jaws 40%
4,000 Target*: Optimise our operational platforms 30% 49% to >
3,000 52%
20% > We have no capitalised costs 2,000
10% 1,000
0 0% 2011 2012 2013 2014 2015 2016 2017 2018 H1 2019
Costs R'mn (LHS) Cost to income ratio (RHS)
^Calculation adjusts for the Group’s 26.57% interest held in the Investec Property Fund (IPF), by deducting the IPF minority interests from income. Page 58 *Which we aim to deliver on over the next three years. Target set in Rands. 6 Banking Optimise capital by focusing on client driven private equity activity SA
SA investment portfolio* excluding investments in What are we seeking to do franchise businesses (H1 2019)
Ave capital Book size Post-tax • Focus on co-investment alongside clients to fund allocated R’bn ROE investment opportunities or leverage third party capital into R’bn funds that are relevant to our client base Investment held in IEP group 6.4 4.3 13.9% • Create flow for and partner with other bank divisions Investment held in property 4.4 1.3 30.2% • Part of the bank’s wider offering to provide a full service to investments clients across the entire capital structure Other principal investments^ 2.0 1.2 -44.7% • Leverage fund activity more broadly across the business / create broader fund franchise Total SA investment portfolio 12.8 6.7 6.9%
Manage down our non core equity investments portfolio
We will manage down our investments whilst recognising our responsibilities as a shareholder
Will release material capital which offers optionality
Reduce volatility in ROE
*Comprising listed and unlisted investments; warrants, profit shares and embedded derivatives; the Group’s 45% interest held in the IEP Group; the Group’s 26.57% interest held in the Investec Property Fund (IPF) and the Group’s 15.0% investment in the Investec Australian Property Fund (IAPF). ^Other equity and related loan exposures, not including investment activities arising from the franchise businesses. Page 59 6 Banking Capital generation and allocation SA
Capital strategy
• Supported by sound capital position and strong capital generation
• Able to self-sustain 8%-10% RWA growth p.a.
• Capital resources are allocated based on our internal capital generation and maintenance targets
• We will manage down our non core equity investments portfolio, releasing material capital and offering optionality
Page 60 6 Banking Focused on ROE SA
SA Specialist Bank ROE trend A clear path for achieving our targets
• Underlying franchise businesses have an ROE in excess of 14% Growing our client base and • ROE drag from SA investment portfolio^, where the ROE is less than 7% > franchise 20%
18% > Continued cost discipline 16%
15.2% 15.1% 14% Investment in new growth 12% 12.8% Target*: > 12.5% 12.7% 12.4% initiatives
10% 10.7% 14% to 10.0% 9.6% 16% 8% > Optimising capital allocation
6%
4% Managing down our non core > equity investments portfolio 2%
0% 2011 2012 2013 2014 2015 2016 2017 2018 H1 2019
^Comprising the Group’s 45% interest held in the IEP Group; the Group’s 26.57% interest held in the Investec Property Fund (IPF) and the Group’s 15.0% investment in the Investec Australian Property Fund (IAPF); and other equity and related loan exposures, not including investment activities arising from the franchise businesses.*Which we aim to deliver on over the next three years. Target set in Rands. Page 61 Banking
Initiatives to enhance shareholder returns: SA Specialist Bank SA
We are well aligned to the Group’s identified five key initiatives to improve returns for shareholders
1 2 3 4 5
Capital Growth Cost Connectivity Digitalisation Discipline initiatives Management
Maintain a Ensuring we remain at Build new disciplined client Continue to invest the frontier of sources of centric approach in our digital and Management of technological revenue across to our technology our capital allocation to innovation, and our client investments platforms in order optimise returns develop new integrated base e.g. Investec Life, whilst investing in to remain initiatives beyond One Investec for Business areas of competitive Place specialisation
Page 62 1 Introduction 4 2 UK Specialist Bank 23 3 SA Specialist Bank 47 44 WealthWealth && InvestmentInvestment businessbusiness 6464 5 Performance 77 6 Summary and Conclusion 88
7 Appendix 90
Page 63 IW&I
Investec Wealth & Investment (IW&I) overview SA & UK
FUM development • Wealth management FUM (£’bn) Our • Discretionary investment management 60 £57bn offering • Stockbroking 50
40
£29bn 30
• Private clients 20
Our clients • Charities 10
0 • Trusts 2011 2012 2013 2014 2015 2016 2017 2018 H1 2019 Discretionary Non-Discretionary
International presence •Direct IW&I manages c.£57bn of FUM globally Our • Intermediaries distribution • Investec Private Bank channels • International UK and Other A leading UK wealth • Digital manager with £39.4bn in FUM UK and Other SA
International recognition SA A leading private wealth manager in SA with £17.3bn in FUM
Page 64 IW&I
What differentiates IW&I? SA & UK
Single consistent global investment process, delivering tailor-made and innovative solutions across jurisdictions
Domestically relevant with international offering, including offshore capabilities and providing access to clients to leading global financial centre in London
Recognised international brand and balance sheet strength attracts investment managers and supports client acquisition
Size allows us to be agile but with the scale and strength to compete successfully
Relationship-driven approach to serving private clients in partnership with Investec Private Bank
Experienced leadership team with proven ability to execute M&A successfully, ensuring IW&I is well placed for expected industry consolidation
Well-positioned for evolving domestic market trends (e.g. financial planning, digital)
Page 65 IW&I
Our growth story SA & UK
IW&I has a strong track record of consistent growth, with over 40% of the increase in FUM since 2011 driven by net inflows
Net Flows: £1.7bn £(0.2)bn* £0.7bn £1.4bn £2.7bn £2.1bn £1.2bn £2.0bn £0.7bn
FUM (£’bn) CAGR: 9% 60 UK and Other SA
UK & Other: 50 Williams de Broe becomes UK & Other: part of IW&I Rensburg 40 Sheppards becomes IW&I
30
20
10
0 2011 2012 2013 2014 2015 2016 2017 2018 H1 2019
*Largely related to one client who moved their portfolio to another institution to serve as collateral in a transaction they were concluding. Excludes sale of unit trust business in the UK. Page 66 IW&I
A single global investment process SA & UK
Exceptional global research capabilities Access to broad investment universe
Research Meetings with Quantitative External from major fund and technical Equities Alternatives information investment managers analysis houses Open tool box to create genuinely Research inputs Bonds Collectives bespoke portfolios for clients Global research team – 32 dedicated FTEs
Structured Property Cash Equities Fixed income Collectives products
Generates ideas Key characteristics
Domestic-focused investment committees • Global reach with truly international perspective
Collective funds • Sole focus on supporting IW&I’s investment managers with no Asset allocation Stock selection selection external clients • Well-resourced with 32 individuals dedicated to investment Bespoke portfolio research - independent team with no dependencies or cross-over construction within set risk parameters with Investec Asset Management • Able to offer global access to distinctive investment opportunities Investment managers Monitoring for clients
- Includes access to alternative assets through collectives Define client suitability • Consistently delivering product innovation, leveraging the breadth of direct access (e.g. Global Leaders Portfolio) Clients
Page 67 IW&I
Snapshot of IW&I UK & Other SA & UK
A leading UK private client manager, offering bespoke discretionary investment management services to a higher-end mass affluent and increasing high-net-worth client base
Key facts* Future growth drivers
Total FUM £39.4bn^ 16% % UK Discretionary 84% • Attract new clients through Click & Invest digital Click & Invest % UK Direct 84% FUM by proposition Mandate**: Target Client > £250k £39.4bn # of UK Clients c.60,000 • Focus on collaborating 84% # of UK Offices 15 Private further with the UK Private Discretionary Bank Bank # of UK IMs 378 Non-discretionary
# of UK FPs 31 • Continue to expand financial planning capability Well placed to benefit from evolving UK market Financial • Develop ways to deliver this Planning advice as a central • Supportive demographic factors with continued growth in component of our core household wealth offering • “Advice gap” post RDR and Pension Freedoms underpinning strong demand for financial advice and long-term savings solutions • Recruit high quality Discretionary investment managers • Competitive market remains relatively fragmented, providing (Target > 90% of FUM opportunities for potential consolidation • Further develop proposition within three years**) to serve growing IFA channel • Trend towards integrating technology-led solutions
*Information as at 30 September 2018. **Split / target based on UK business only. ^Comprises UK, Guernsey, Switzerland, Ireland and Hong Kong. UK comprises c.90% of total FUM. Where IMs is investment managers and FPs is financial planners. Page 68 IW&I
Snapshot of IW&I SA SA & UK
A leading private client manager in SA, providing domestic and offshore wealth management to an international-minded client base
Key facts* Future growth drivers
Total FUM R320bn
% Discretionary and • Our wealth managers, working 40% annuity 40% with our fiduciary and tax Fiduciary teams, are playing key roles in % of which is offshore 51% FUM by assisting clients with retirement and estate planning % Direct 91% Mandate: 60% R320bn Target Client > R5mn
# of Clients c.27,000 Private • Increase collaboration with Discretionary and annuity Private Bank which has a very Bank # of Offices 10 Non-discretionary similar target client base
# of IMs 100
Well positioned to capitalise on market changes • Developing single operating • Increasing demand for “financial emigration” to offshore Offshore platform for SA and Swiss jurisdictions (e.g. Switzerland and UK markets) businesses to combine offshore proposition • Growing appetite for non-domestic investment opportunities (e.g. global equities) • We continue to enhance all • Increasing demand for advisory mandates – significant shift in levels of access for our clients, market landscape from stockbroking to discretionary fund Discretionary/ augmenting our digital access management annuity and reporting, while retaining the increasingly important • HNW investors focused on further diversifying portfolios, human touch particularly in alternatives
*Information as at 30 September 2018. Page 69 IW&I
Enhancing connectivity across the Group SA & UK
IW&I has a collaborative approach with the Specialist Bank to serving private clients and is widely recognised as one of the top international private bank and wealth managers
• Access to IW&I’s leading wealth One Place proposition in SA management services, backed by the security of Investec’s balance sheet Local Local banking • Improved client experience with more investments integrated approach to wealth management / Benefits private banking International International for clients banking investments • Market-leading digital proposition, with access to full suite of banking and investment • One Place provides clients seamless, integrated services (e.g. One Place) access to banking and investment services, both locally and internationally • Access to lending products (e.g. Lombard lending for private clients) • Evidences how IW&I successfully uses technology and data to enhance the client experience, while still offering exceptional personal service in private banking and wealth management • Provides significant competitive advantage in client acquisition Illustrative client journey
• Allows IW&I and Investec Private Bank to remain focused on core competencies Corporate Investment Private Benefits Wealth Bank Bank Bank for • More embedded with clients if providing both Investec wealth management and private banking, Work with Management benefitting client retention company from Advisory role introduced to IW&I manages early stage, on eventual Private Bank proceeds • Beneficial in attracting and recruiting top providing liquidity event early in generated on investment managers / financial planners bridge / term / (e.g. IPO) Investec liquidity event acquisition from competitors (particularly global banks) relationship financing
Page 70 IW&I
Digital case study: Investment in Click & Invest SA & UK
Click & Invest proposition Presents significant market opportunity
• “Robo-advice” – automated simplified advice service for UK clients Forecast Robo-Advice Market • “Robo-advice” market already who fall below the threshold for core discretionary services Growth (FUM, £’bn)1 well established in the US and UK • Target client: Minimum of £2,500 of investable assets 35.9 . UK market forecast to grow • Product offering: Five actively-managed, risk-rated portfolios across 26.8 to c.£36bn of FUM by 20221 a range of wrappers 18.3 • Growth driven by demand for • Leverages IW&I’s established global investment process low-cost, digital savings and 11.1 investments solution • Exceptional service-led proposition, with 24/7/365 customer service 5.8 complementing the automated advice process 2.6 • Institutions actively investing in robo-advice start-ups 2017 2018 2019 2020 2021 2022 Award- Active Service-led winning investment proposition content management Click & Invest’s strategy for growth
Why Click & Invest is important for Investec Continued organic growth, leveraging Investec’s strong and trusted brand • Diversifies IW&I’s distribution capabilities, recognising demand for low-cost digital savings and investment solutions Next step is to launch self-invested personal pension • Natural feeder into core discretionary business as Click & Invest (SIPP) product on platform clients accumulate wealth • Potential to service smaller accounts better and more efficiently, enhancing retention of existing core clients Seek to develop strategic partnerships • Leverage Click & Invest technology to support digitalisation strategy in wider Investec Group • Potential to extend proposition as a solution for IFAs and third party wealth managers Develop IFA proposition
1. Statista, July 2018. . Page 71 IW&I
IW&I key financials SA & UK
Operating income Operating profit before tax
£’mn £’mn Operating cost base of £306mn comprises £223mn of staff costs 450 120 40% 405 and £83mn of non-staff costs 400 361 98 35% 100 93 91 350 325 313 86 30% 288 84 79 29 300 68 80 28 62 25% 249 66 23 250 59 22 196 54 203 60 20% 51 20 200 46 156 43 54 40 39 15% 150 314 40 17 277 13 54 251 257 69 229 15 16 63 65 10% 100 195 57 46 142 160 20 34 33 5% 50 102 25 23
- - 0% 2011 2012 2013 2014 2015 2016 2017 2018 H1 2019 2011 2012 2013 2014 2015 2016 2017 2018 H1 2019
UK and Other South Africa South Africa UK and Other SA Operating Profit Margin UK and Other Operating Profit Margin
• Track record of increasing AUM, driving consistent operating • Consistent profit growth with high cash conversion income growth • UK & Other operating profit margin decrease in recent years - 87% of operating income in H1 2019 was annuity income reflects investment in: - Operating income linked to market movements - Headcount to support investment in technology development (both the core business and Click & Invest) • Income margin in the UK & Other has remained relatively constant in recent years at 84bps for H1 2019 - New business growth with recruitment of experienced investment managers and financial planners - Reflects increase in UK discretionary FUM, which generates higher fee margins - Headcount and systems to ensure compliance with recent regulatory changes (e.g. MiFID II, GDPR etc.) • Income margin in SA has increased, reflecting the growth in the discretionary business • SA operating margin has remained relatively stable - Reached 48bps for H1 2019
Page 72 IW&I
Investment whilst maintaining cost discipline SA & UK
We will continue to invest in our franchise… …while maintaining our cost discipline
• Recruitment: We continue to invest in hiring experienced • Experienced management team across the UK and SA investment managers and financial planners to drive client that will act accordingly depending on market conditions acquisition - Range of management actions available to mitigate • Digitalisation: Further development of client platforms impact of market volatility (e.g. One Place and Click & Invest) • Leverage existing operating platform to realise scale - The development of Click & Invest has driven innovative benefits from organic and inorganic growth change across other areas of the business (e.g. online valuations) • Disciplined approach to capital spend and ongoing maintenance costs • Scalability: Focused approach to investment in technology to drive growth (e.g. new operating platform being • Seek to leverage lower cost SA operational capacity implemented across SA and Switzerland) where possible (e.g. customer service centre)
• Consolidation: We will selectively consider acquisition UK & Other cost to opportunities (including investment teams) where additive SA cost to income target* to our existing capabilities income target* < 70% 73% - 77%
We will continue to invest in building a scalable platform for the benefit of all our stakeholders
*Which we aim to deliver on over the next three years. SA target set in Rands. Page 73 IW&I
IW&I’s strategic focus areas SA & UK
6 Continue to build a scalable operating platform to support future growth and margin expansion in the medium-term 5 Consolidate internal collective fund platforms (e.g. World Axis, Fund of Funds) and market externally 4 Extend breadth of global investment offering, particularly in alternative asset classes
3
Focus on investing and developing digital channel
2 Expand financial planning (UK) and fiduciary capabilities (SA)
1
Increase collaboration with wider Investec Group
Page 74 Initiatives to enhance shareholder returns: Wealth & Investment
We are well aligned to the Group’s identified five key initiatives to improve returns for shareholders
1 2 3 4 5
Capital Growth Cost Connectivity Digitalisation Discipline Initiatives Management
We will continue to Focus on increasing We will invest in Clear set of strategic invest in building a Capital light business our collaboration further developing initiatives designed scalable platform, generating attractive with the Private our digital platforms to deliver revenue whilst maintaining a RoEs Bank, both in the UK to enhance our client growth disciplined approach and SA proposition to costs
Page 75 1 Introduction 4 2 UK Specialist Bank 23 3 SA Specialist Bank 47 4 Wealth & Investment business 64 55 PerformancePerformance 7777 6 Summary and Conclusion 88
7 Appendix 90
Page 76 Summary of key financials
Strong growth in key earnings drivers… …supported by robust balance sheet • We have strong momentum across our businesses, underpinned by our high- Net core loans and advances Customer deposits quality client franchises
£’bn £’bn • Net core loans and advances 30 35 UK and Other Southern Africa UK and Other Southern Africa have grown from £14.3bn in 30 2014 to £24.2bn in H1 2019, 25 a CAGR of 12% 20 20
15 • FUM has increased from 10 £41.9bn in 2014 to £57.3bn 10 in H1 2019, a CAGR of 7% 5
0 0 • Robust balance sheet, with 2014 2015 2016 2017 2018 H1 2019 2014 2015 2016 2017 2018 H1 2019 significant portion of cash and near cash balances FUM Cash and near cash balances
£’bn £’bn 70 14 UK and Other Southern Africa UK and Other Southern Africa 60 12
50 10
40 8
30 6
20 4
10 2
0 0 2014 2015 2016 2017 2018 H1 2019 2014 2015 2016 2017 2018 H1 2019
Information on this slide is based on the results of the ongoing business (excluding UK Specialist Bank legacy assets and businesses sold) and excluding IAM, unless otherwise specified. Page 77 Summary of key financials (cont.)
£’mn 2,000 UK and Other Southern Africa 1,800 1,600 1,400 Resulting in a 1,200 We have delivered strong growing 1,000 growth in our revenue base, with over 50% revenue base 800 generated in the UK 600 400 200 0 2014 2015 2016 2017 2018 H1 2019
£’mn 1,400 71%
1,200 69% 67% 1,000 We have made strategic investments across our Our cost to 65% 800 core businesses to build a income reflects 63% 600 highly scalable platform investment 61% capable of supporting our 400 59% growth ambitions 200 57%
0 55% 2014 2015 2016 2017 2018 H1 2019 UK and Other costs (LHS) Southern Africa costs (LHS) Cost to income ratio^ (RHS)
Information on this slide is based on the results of the ongoing business (excluding UK Specialist Bank legacy assets and businesses sold) and excluding IAM, unless otherwise specified. Page 78 ^Calculation adjusts for the Group’s 26.57% interest held in the Investec Property Fund (IPF), by deducting the IPF minority interests from income. Impairments have reduced in recent years
Core loans and credit loss ratio • Asset quality has improved as the legacy portfolio has been managed down (less than 0.8% of global loan book)
£’bn 30 5% • Ongoing portfolio continues to have low levels of impairments and defaults 25 4% 20 3% - Credit loss charge of 0.34% in H1 2019 15 2% 10 - Stage 3 loans net of ECL as a percentage of net core
5 1% loans of 1.7% in H1 2019
0 0% 2011 2012 2013 2014 2015 2016 2017 2018 H1 2019
Core loans(LHS) Credit loss ratio (RHS) Stage 3 loans before collateral as a % of net core loans (RHS)
Impairments Core loan analysis (H1 2019)
£’mn Largest sub-categories 400 16% 360 Commercial investment 11% property 320 280 HNW and private client 22% mortgages 240 45% £24.2bn 200 HNW and specialised 16% 160 lending 39% 120 General corporate 13% 80 Acquisition finance 10% 40 0 Lending collateralised by property Small ticket asset 7% 2011 2012 2013 2014 2015 2016 2017 2018 H1 2019 finance HNW and other private client lending Corporate and other Fund finance 6% UK and Other South Africa Legacy and sales*
Information on this slide is based on the results of the ongoing business (excluding UK Specialist Bank legacy assets and businesses sold) and excluding IAM, unless otherwise specified. Page 79 * Refers to the remaining UK legacy business and Group assets that were sold in the 2015 financial year. We have a balanced portfolio of businesses with a solid capital light revenue base
Stable With significant capital light And growing recurring geographic balance businesses revenues
Operating income Operating income Operating income
42% 39% 2014 43%
57% 58% 61%
29%
44% 2018 46% 54% 56%
71%
UK and Other Southern Africa Balance sheet driven Capital light Annuity ^ income Other income
Information on this slide is based on the results of the ongoing business (excluding UK Specialist Bank legacy assets and businesses sold) and excluding IAM, unless otherwise specified. Page 80 ^Where annuity income is net interest income and annuity fees. We are focused on cost discipline
Breakdown of costs (2018) • We are focused on cost discipline By business unit By type - Targeting a Group cost to income 4% 5% 2% 5% 5% ratio of less than 63% in the medium- 4% term
19% 11% 43% • We have set clear divisional cost to income £1,271mn £1,271mn 51% targets:
22% - UK Bank: < 65% 29%
UK Bank SA Bank UK IW&I Fixed staff Variable staff Business Premises Equipment Marketing - UK Wealth: 73% -77% SA IW&I Group costs Depreciation - SA Bank: 49% - 52% Analysis of Group Costs (2018)
- SA Wealth: < 70% UK SA • We have already taken action to reduce Group Costs with opportunities to do more in 39% 45% the medium-term 46% 48% £34mn £16mn
1% 1% 1% 12% 8% Personnel Business Premises Fixed assets Marketing and CSI
Page 81 Contribution to Group ROE by business
IWI SA and SA Specialist Bank1 UK SpecialistUK Specialist Bank 3Bank Group Costs InvestecInvestec Group UK Group
H1 2019 ROE, in £’s unless otherwise stated
4 26.4% Group: 11.0% 14.0%
13.0% 12.4%
11.6%
9.3% 9.1%
6.9%
-47.8% n.m. 1 SA Bank ex Investment Total UK Bank ex new New banking Total Wealth & Investec Ltd Investec plc 2 Investment Portfolio SA Bank banking proposition UK Bank Investment Portfolio proposition
82% 18% 100% 96% 4% 100%
SA Bank Capital allocation (Sep-18) UK Bank Capital allocation (Sep-18) £1,965mn £1,413mn
Information on this slide is based on the results of the ongoing business (excluding UK Specialist Bank legacy assets and businesses sold) and excluding IAM, unless otherwise specified; 1. Shown on Rand currency basis; 2. Does not include equity investments residing in our franchise client businesses; 3. Using a normalised tax rate of 18%; 4. Excludes goodwill associated with Rensburg Sheppards acquisition. Including goodwill on Rensburg Page 82 Sheppards acquisition, Wealth & Investment generated an ROE of 16.0% in H1 2019. Simplifying and refocusing the Group to improve ROE in the medium-term
A number of our specialist businesses are already operating at attractive ROEs, however, we recognise that we need to address a number of areas to improve ROE
• We are focused on managing down our non-core equity investments portfolio
Investment • Made up of attractive assets, however from an income perspective these assets derive Portfolio* in revenue which is very lumpy in nature SA • Releases material capital which can be re-deployed in our higher ROE businesses or returned to shareholders
Optimise • We are focused on optimising the capital allocation in our core businesses Capital Allocation in • We are buying back shares from the market to meet long term share awards and variable SA remuneration in the form of shares
• The business has undergone a period of investment to build out the platform which has impacted returns UK Private - The legacy portfolio was also a drag on the Private Bank historically Bank • Strategy has now shifted from platform build to client growth and we are already seeing good traction
• More disciplined approach to cost management, particularly within our central functions Cost Management • We have also set clear targets within our business units, and there will be much greater accountability to ensure we achieve these
*Comprising the Group’s 45% interest held in the IEP Group; the Group’s 26.57% interest held in the Investec Property Fund (IPF) and the Group’s 15.0% investment in the Investec Australian Property Fund (IAPF); and other equity and related loan exposures, not including investment activities arising from the franchise businesses. Page 83 Diversified funding strategy
Conservative and prudent funding strategy Funding primarily consists of customer deposits
Global – March 2018. Total funding £38.4bn
4% 1% 7% 1 Maintaining a base of high quality liquid assets Customer deposits
8% Interbank deposits
Debt securities in issue
Diversifying funding sources to enhance net interest 2 Liabilities arising on securitisation of margin assets Subordinated liabilities 81%
3 Limited concentration risk Fully self-funded: healthy loan to deposit ratio
UK and Other SA
81% 80% 79% 77% 74% 73% 75% 75% 76% 4 Low reliance on interbank funding 67% 62% 57%
5 Maintaining a stable retail deposit franchise
2014 2015 2016 2017 2018 H1 2014 2015 2016 2017 2018 H1 2019 2019
Page 84 Underlying capital generation supports future growth and dividends
• There is positive capital generation across all our core businesses, with all businesses self-sufficient Target Group RoE*:
• UK Bank has sufficient capital to grow the Private 12%-16% Bank to scale, while also supporting c.7%-8% growth in RWA p.a.
• Dividends from the Wealth & Investment business passed straight through to shareholders
Supports RWA Growth: • The SA Bank has a long history of strong capital generation c.8%-10% Generate sufficient capital, post dividends to support c.8%-10% growth in RWA p.a.
Will release material capital through managing down our non-core equity investments portfolio in SA Supports Dividend Payout:
30%-50% SA has covered the dividend for those Investec plc shareholders on the SA branch register
*Which we aim to deliver on over the next three years. Page 85 Clear set of financial targets underpins our objectives Which we aim to deliver on over the next three years
Metric: FY 2018 H1 2019 Medium-term Commentary** target UK Combined Target: 11% to 15%* UK Bank Target: 10% to 13% Group ROE 9.8% 11.0% 12% to 16%* SA Combined Target: 15% to 18%* SA Bank Target: 14% to 16%
UK Bank Target: < 65% UK Wealth Target: 73% to 77% Cost to Income Ratio^^ 68.2% 68.5% < 63% SA Bank Target^^: 49% to 52% SA Wealth Target: < 70%
Will also benefit from the implementation Investec Limited CET1 10.2%^ 10.3%^ > 10% of FIRB which is not reflected in ratios presented
Capital adequacy target range of between Investec plc CET1 11.0%^ 10.4%^ > 10% 14% and 17% on a consolidated basis for Investec plc and Investec Limited
Dividend Payout Ratio n.a. n.a. 30% to 50%
*Target takes into consideration Group Central Costs. **All SA targets are set in Rands. ^As reported including IAM. Page 86 ^^Calculation adjusts for the Group’s 26.57% interest held in the Investec Property Fund (IPF), by deducting the IPF minority interests from income. 1 Introduction 4 2 UK Specialist Bank 23 3 SA Specialist Bank 47 4 Wealth & Investment business 64 5 Performance 77 66 SummarySummary andand ConclusionConclusion 8888 7 Appendix 90
Page 87 Objectives for today’s presentation
Recap on • Simplification and greater focus to enhance the long-term prospects of both businesses demerger rationale • Opportunity to build on linkages between the Specialist Bank and Wealth & Investment businesses
Focus on • International specialist bank with leading market positions in select niches Investec’s strategic • One of the leading private client wealth managers in the UK and SA positioning • Ability to leverage cross-border platforms – domestically relevant and international networked
Highlight • More disciplined approach to capital allocation initiatives to • Clear set of growth and cost initiatives enhance returns • Drive greater connectivity and continue to invest in digital capabilities
Demonstrate • All businesses are self-sufficient sustainable • Existing capital generation supports growth and dividends organic capital generation • Maintain appropriate capital adequacy / buffer across Investec plc and Investec Limited
Page 88 1 Introduction 4 2 UK Specialist Bank 23 3 SA Specialist Bank 47 4 Wealth & Investment business 64 5 Performance 77 6 Summary and Conclusion 88
77 AppendixAppendix 9090
Page 89 Our commitment to sustainability
At Investec, sustainability is about building resilient profitable businesses that are focused on growing and preserving stakeholders long-term wealth, whilst contributing in a responsible way to the health of our economy, our people, our communities and the environment for a prosperous, sustainable future for all.
We integrate social, ethical and environmental considerations into day-to-day operations and our sustainability approach is based on the integration of people, planet and profit
• We depend on the experience and proficiency of our people to Recognition perform and deliver superior client services • We use our specialist financial skills and expertise to provide efficient • Voted third most attractive employer in SA People solutions for clients in the 2018 Universum awards in the • We leverage key stakeholder relationships to enhance our impact on business/commerce sector society and the macro-economy • Ranked 27th in the world and 4th in the UK for progress in gender equality and reporting by Equileap in 2018 • We play a critical role in funding a stable and sustainable economy • Investec Group was awarded a B rating for that is cognisant of the world’s limited natural resources the Carbon Disclosure Project (CDP) • We support the transition to a low-carbon economy and believe we • Finalist in the 2018 Thomson Reuters Planet can make a meaningful impact in addressing climate change Southern Africa Excellence Awards in the • We consider any meaningful activity that either reduces the negative Most Impactful Business: Doing Good and impact on, or prolongs the life of, our planet Doing Well Award category • Winner of the Business of the Year Award by Business Charity Awards 2017 (for • We create sustained long-term wealth by organically growing our core Beyond Business programme) in the UK businesses and maintaining a balanced and resilient business model • Winner of the National CSR Awards in the • We aim to improve returns and operational efficiency while Profit maintaining a sound capital base and strong liquidity individual Community (Legacy) Project Award category (for Beyond Business) (Prosperity) • We are entrepreneurial and focus on creating value for shareholders • Winner of the Community Partners award in the Lord Mayor’s Dragon Awards (for Beyond Business)
We recognise the role that the private sector can play in advancing the Sustainable Development Goals to build a more resilient and inclusive world. Investec has committed to participate and collaborate with clients and stakeholders to support delivery of the goals.
Page 90 Our environmental, social and governance (ESG) performance
UK Banking peer group Included in the following CDP (Carbon disclosure project) Carbon footprint sustainability indices: A A A- tCO2 Investec plc ranked in the Dow Jones A B A- 350,000 Sustainability Investment (DJSI) Index B C C 300,000 as one of 15 industry leaders on the DJSI B- 250,000 World and one of nine in the DJSI Europe C 200,000 indices C- D 150,000 D- Investec Limited ranked in Dow Jones 100,000 E Sustainability Investment (DJSI) Index 50,000 E- as one of four industry leaders on the DJSI F - * Emerging Markets Index Barclays Lloyds Goldman Maquarie Investec Close Goldman Sachs Lloyds Banking group plc Banking Sachs plc Brothers Barclays plc Investec plc group Included in the FTSE4Good Index Close Brothers Macquarie * Excludes scope 3 Constituent of the ECPI Index
SA Banking peer group Constituent of the FTSE/JSE Responsible Investment Index Series CDP (Carbon disclosure project) Carbon footprint A A- A- tCO2 Rated as AAA on the MSCI Global A- B 300,000 Sustainability Index Series B B- B- C 250,000 C Member of the STOXX Global ESG C- 200,000 Leaders Indices D 150,000 D-
E 100,000 E-
F 50,000
- Standard ABSA FirstRand Nedbank Investec FirstRand Nedbank Investec Limited Standard Bank ABSA Bank Limited
Page 91 Driving ESG impact
Examples of how we are deploying our balance sheet to maximise social and environmental impact
Power and infrastructure finance • Participated in £1.2bn of renewable energy projects Committed to supporting the transition • Clean energy makes up 88% of our total energy lending portfolio to a clean and energy-efficient global • Investec and UK Climate Investments committed R1bn to a dedicated economy renewable energy investment (Revego Africa Energy) • Eight Investec funded projects have an installed capacity of approximately 1 450MW of clean energy • £200mn funding arranged, acting as joint arranger and underwriter for the acquisition of six UK operational photovoltaic plants Investec Property Fund Exploring alternate renewable energy • Implementation of Solar rooftops in commercial properties providing sources and energy efficiency approximately ¼ of their monthly energy consumption opportunities
Wealth & Investment and Private Client activities Supporting our clients and stakeholders • 50% of charitable investments go to education initiatives in attaining their social and • Creating opportunities for clients to invest in funds that grow qualifying environmental aspirations privately-owned SMMEs
Corporate • Investec has taken an £8mn equity stake in UK based company that uses Providing equity / capital investment for innovation to reduce water consumption from cistern flushing by up to 84% innovation in sustainable water supply • Provided capital investment to a London-based company specialising in electric and electric vehicles vehicle rapid charging, which will allow 1500 rapid chargers across the UK, improving pollution in the city of London
Page 92 Embedding ESG into daily operations
Investec supports the transition to a low carbon economy and believe we can make a Climate change statement meaningful impact in addressing climate change
Our ESG Lending policy requires an evaluation of lending exposures to manage Lending policy potential adverse impacts to the environment and to human rights
Our ESG Investing policy includes consideration of our responsibility in managing Investing policy potential adverse impacts to the environment and to human rights
We have established ESG guidelines for our lending and investing businesses based ESG Guidelines on the IFC definitions of high and medium risk industries
Signatory - 30% Club in both SA and the UK Investec Gender equality Signatory - HM Treasury Women in Finance Charter (Investec Bank plc and Investec Wealth & Investment UK )
Participant - 10 principles United Nations Global Compact Human rights Support the international agenda to abolish human trafficking, slavery, forced and child labour including the legislated UK Modern Slavery Act 2015
One of the first signatories to the Youth Employment Service (YES) initiative in SA, Economic growth and committing to finding employment for approximately 1 200 youth annually for the next decent jobs three year
Page 93 Uncertainty with respect to Brexit, but our business remains resilient
Key points • We have limited European business outside of Ireland and so the overall impact of Brexit on our client franchise will be limited • Brexit will result in a restructure and downscaling of our Irish operations, giving rise to some one off restructuring costs • The giving up of the Irish branch license would mean repaying c.€1.3bn of deposits as a one off cost • Should there be a significant slowdown in economic activity due to Brexit developments and subsequent reduced client activity or deferral of investment decisions, this could impact revenue and impairments
EU access via Irish business HNW and high income residential mortgages • Restructure of Irish branch into MiFID licensed entity • Focused on target clients with lending in established areas (London and the South East) • Costs related to the consequential unwinding of Irish deposits and other restructuring costs are anticipated in the coming months • Average loan to value c.50-60% • Significant additional liquidity raised in anticipation of this • Recourse to principal and high level of cash equity contributions into transactions
Good quality commercial property portfolio that has held up in High cash balances at £6.5bn times of stress • c.77% of the portfolio is in the UK (largely London and Home Counties). Of the Asset quality remains sound non-UK portion the majority of the exposure is in Germany
• Low levels of impairments • The book is income producing supported by leases with good quality tenants that provide consistent cash flows • Credit loss ratio long term trend: 30bps to 40bps (current: 41bps) • Average loan to value c.60-70%. Average loan size generally <£10mn • In addition to the property security value and lease cash flow streams, personal guarantees from principals are held
Legacy book has been managed down
• Net loan book: £189mn at 30 September 2018 (1.9% of total UK net core loans) • No repeat of substantial impairments expected
Page 94 UK Specialist Bank: Key metrics
Customer loans and deposits
£’bn 14 90%
80% 12 70% 10 60%
8 50%
6 40% 30% 4 20% 2 10%
0 0% 2011 2012 2013 2014 2015 2016 2017 2018 H1 2019 Customer accounts (deposits) Net core loans and advances Loan to deposit ratio
Net interest margin RoA and RoRWA
£’mn £’mn 20,000 2.5% 1.6% 2.19% 2.11% 20,000 1.4% 1.96% 1.2% 1.4% 1.85% 2.0% 1.2% 15,000 1.82% 1.0% 1.1% 1.2% 1.1% 1.2% 1.60% 15,000 1.0% 1.0% 1.5% 1.0% 1.54% 0.8% 0.7% 1.39% 1.45% 0.7% 0.7% 0.7% 0.8% 10,000 10,000 0.7% 1.0% 0.5% 0.6% 0.4% 0.4% 5,000 5,000 0.4% 0.5% 0.2%
0 0.0% 0 0.0% 2011 2012 2013 2014 2015 2016 2017 2018 H1 2019 2011 2012 2013 2014 2015 2016 2017 2018 H1 2019
Interest earning assets £'mn (LHS) Net interest margin (RHS) Total assets £'mn (LHS) Total risk-weighted assets £'mn (LHS)
RoA (RHS) RoRWA (RHS)
Information on this slide is based on the results of the ongoing business (excluding UK Specialist Bank legacy assets and businesses sold), unless otherwise specified. Page 95 UK Specialist Bank: Key metrics (cont.)
Revenue Costs
£’mn £’mn 800 100% 600 100% 700 500 77% 80% 77% 75% 74% 76% 73% 76% 80% 600 70% 71% 60% 400 500 56% 57% 60% 56% 60% 400 47% 48% 300 43% 40% 300 31% 35% 40% 200 200 20% 20% 100 100 0 0% 0 0% 2011 2012 2013 2014 2015 2016 2017 2018 H1 2019 2011 2012 2013 2014 2015 2016 2017 2018 H1 2019 Net interest income Annuity fees and commissions Costs £'mn (LHS) Cost to income ratio (RHS) Other fees and other operating income Customer flow trading income Investment and associate income Annuity income^ as a % of total income
Impairments and credit loss ratio Profit and returns
£’mn £’mn
280 2.5% 200 16.8% 17% 240 2.0% 150 11.4% 11.5% 200 10.6% 10.9% 12% 10.0% 9.6% 1.5% 8.5% 9.3% 160 7.0% 100 7% 120 1.0% 3.6% 3.2% 2.6% 2.1% 5.5% 80 0.71% 0.72% 1.7% 50 -1.8% 2% 0.46% 0.5% 40 0.10% 0.26% 0.27% 0.24% 0.41% 0.12% 0 0.0% 0 -3% 2011 2012 2013 2014 2015 2016 2017 2018 H1 2019 2011 2012 2013 2014 2015 2016 2017 2018 H1 2019
Impairments UK and Other (LHS) Impairments Legacy and sales* (LHS) Net profit before tax £'mn (LHS) ROE post tax statutory (RHS)
ROE post tax onging business (RHS) credit loss ratio Ongoing (RHS) credit loss ratio Statutory (RHS)
Information on this slide is based on the results of the ongoing business (excluding UK Specialist Bank legacy assets and businesses sold), unless otherwise specified. Page 96 ^Where annuity income is net interest income and annuity fees. *Refers to the remaining UK legacy business and Group assets that were sold in the 2015 financial year. SA Specialist Bank: Key metrics
Customer loans and deposits
R’bn 350 90%
80% 300 70% 250 60%
200 50%
150 40% 30% 100 20% 50 10%
0 0% 2011 2012 2013 2014 2015 2016 2017 2018 H1 2019
Customer accounts (deposits) Net core loans and advances Loan to deposit ratio
Net interest margin* RoA and RoRWA
R’mn R’mn 400,000 2.5% 500,000 1.6% 1.4% 1.4% 2.05% 1.2% 1.4% 1.98% 1.99% 1.99% 400,000 1.3% 1.79% 1.90% 2.0% 1.1% 300,000 1.1% 1.3% 1.2% 1.89% 1.90% 1.0% 0.9% 1.0% 1.84% 1.0% 0.9% 1.0% 1.5% 300,000 1.0% 200,000 0.8% 0.8% 0.8% 0.9% 1.0% 200,000 0.7% 0.7% 0.6%
100,000 0.4% 0.5% 100,000 0.2%
0 0.0% 0 0.0% 2011 2012 2013 2014 2015 2016 2017 2018 H1 2019 2011 2012 2013 2014 2015 2016 2017 2018 H1 2019
Total assets R'mn (LHS) Total risk-weighted assets R'mn (LHS) Interest earning assets R'mn (LHS) Net interest margin (RHS) RoA (RHS) RoRWA (RHS)
* Excluding funding issued by the Investec Property Fund (IPF) in which the Group has a 26.57% interest. Page 97 SA Specialist Bank: Key metrics (cont.)
Revenue Costs*
R’mn R’mn 7,000 60% 16,000 90% 54% 55% 76% 77% 53% 53% 50% 51% 51% 73% 50% 50% 14,000 70% 72% 80% 6,000 50% 68% 65% 68% 64% 70% 12,000 5,000 60% 40% 10,000 50% 4,000 8,000 30% 40% 3,000 6,000 30% 20% 2,000 4,000 20% 10% 2,000 10% 1,000
- 0% 0 0% 2011 2012 2013 2014 2015 2016 2017 2018 H1 2019 2011 2012 2013 2014 2015 2016 2017 2018 H1 2019 Investment and associate income Customer flow trading income Costs R'mn (LHS) Cost to income ratio (RHS) Other fees and other operating income Annuity fees and commissions
Net interest income Annuity income^ as a % of total income
Impairments and credit loss ratio Profit and returns
R’mn R’mn 15.1% 1,000 0.8% 6,000 15.2% 16% 0.71% 14% 0.65% 0.7% 5,000 12.8% 800 0.61% 0.6% 12% 10.7% 12.5% 12.7% 12.4% 4,000 9.6% 0.5% 10% 600 0.42% 10.0% 0.4% 3,000 8% 0.28% 0.28% 0.26% 0.29% 400 0.28% 0.3% 6% 2,000 0.2% 4% 200 1,000 0.1% 2%
0 0.0% - 0% 2011 2012 2013 2014 2015 2016 2017 2018 H1 2019 2011 2012 2013 2014 2015 2016 2017 2018 H1 2019
Impairment charge R'mn (LHS) Credit loss ratio ratio (RHS) Net profit before tax R'mn (LHS) ROE post tax (RHS)
^Where annuity income is net interest income and annuity fees; *Cost to income calculation adjusts for the Group’s 26.57% interest held in the Investec Property Fund (IPF), by deducting the IPF minority Page 98 interests from income.